June Budget – VAT postal service
The Government have confirmed that the VAT treatment of certain services provided by the Royal Mail will become subject to VAT from 31 January 2011. The introduction of this measure follows a European Court of Justice’s (ECJ) decision which challenged the Royal Mail’s eligibility to be the only provider of postal services to be exempt from VAT.
The ECJ broadly confirmed that the Royal Mail as the UK’s public postal service is the only body that can benefit from the VAT exemption for postal services. However, the ECJ also ruled that VAT should be applied where the Royal Mail individually negotiates prices or provides services which are not subject to price controls or regulatory issues.
This includes services such as:
- Individually negotiated services
- Parcelforce services
- Door-to-door (unaddressed mail)
- Mailroom services.
The Government will legislate for this measure in the Finance Bill to be introduced following the summer recess.